The recent Court of Appeal judgment in Haworth & Ors v The Commissioners for His Majesty’s Revenue and Customs [2025] EWCA Civ 822 has confirmed that an appropriately broad test should be used for the purpose of establishing the place of effective management (“POEM”) of a trust as required by many double tax treaties, confirming that the central management and control test (“CMC”) set out in Wood v Holden (Inspector of Taxes) [2006] EWCA Civ 26, [2006] 1 W.L.R. 1393 does not apply to trusts. While the decision relates to the interpretation of the Double Taxation Treaty (“DTT”) as between the United Kingdom and Mauritius, it may be used by HMRC going forward to determine the POEM of trusts for the purposes of other DTTs as well as for companies and partnerships seeking to rely on DTTs based on the OECD Model Tax Convention (the “Model Convention”). In light of such far-reaching implications, this article details the Court of Appeal’s judgment.
Case Overview
In Haworth the appellants were settlors of three family trusts, appealing the Upper Tribunal’s decision that they were liable to UK capital gains tax (“CGT”) on the disposal of company shares held by the trusts (under s2 TCGA 1992). On the basis that Mauritius did not charge tax on such gains, the appellants’ tax advisers considered that CGT could be avoided through the UK-Mauritius DTT (Art 13) if UK resident trustees (determined under s69 TCGA 1992) were appointed (avoiding any s86 TCGA 1992 settlor attributed gains) in the same year as the Mauritius resident trustees but after the share disposal and a CMC Wood v Holden approach was followed in determining where Article 4(3) POEM attributable primary taxing rights fell.
The appellants argued that the POEM of the trusts was the place in which the relevant decisions were made by their trustees (unless there was any element of “rubber stamping” involved in the decision-making process).
On 1 July 2025, the Court of Appeal rejected this submission and dismissed the appeal. There was some useful and interesting discussion around the interpretation of DTTs.
DTT Interpretation
Newey LJ confirmed that DTTs are not unilateral agreements such that the principles of interpretation followed by one contracting state could be presumed to automatically apply. Instead the role of the court is to establish, by objective and rational means, the common intention which can be ascribed to the two contracting states.
As the UK-Mauritius DTT was based on the OECD Model Convention there was a review of the applicable commentary around determining the meaning of POEM under Article 4(3) including commentary which post-dated the signing of the relevant DTT. The commentary on Article 4(3) stated that an entity may have more than one place of management, but it can have only one place of effective management at any one time.
Unlike in relation to a corporate, Newey LJ was keen to establish that a trust’s CMC can potentially, be in more than one place and this meant the concept of CMC was not well-suited to perform the function of a DTT POEM test.
Crucially with respect to the particular facts of the Haworth case, it was also legitimate to have regard to the circumstances in which trustees from a particular jurisdiction were appointed.
The case places particular emphasis on the pre-determined plan/ preordained decision making which led to the trustees’ appointment and as such the POEM was in the UK. It was also noted that the location of the trust’s professional advisers will not determine the POEM of the trust (it is not the advice that is relevant but rather who decides to follow that advice) and the POEM should not be determined only by reference to the circumstances at the “moment of disposal”.